"Perhaps the sentiments put forth here are not yet sufficiently fashionable to procure them general favor. A long habit of not thinking a thing wrong gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason."
--Thomas Paine

Thursday, April 30, 2015

In his piece this week, "Baltimore, a Great Society Failure," National Review editor Rich Lowry presents events in Baltimore as demonstrative of the failure of social programs dating back fifty years to the War on Poverty. "The city hasn’t been 'neglected.'" Lowry asserts, "It has been misgoverned into the ground. It is a Great Society city that bought into the big-government vision of the 1960s more than most, and the bitter fruit has been corruption, violence and despair." Lowry's piece walks through all of the evils that plague urban America. Hostility to business, high taxes, crime, patronage, single parent families and teachers unions. All in a state, he points out, with among the most generous welfare systems in the country.

Lowry's focus may have been Baltimore, but his larger purpose was to take advantage of the public's momentary focus on the plight of urban America to suggest that more of the same is unlikely to cure what ails that or other cities. Conditions in Baltimore mirror the state of affairs across urban America. Lowry's is an indictment of social policies dating back a half century to the Great Society of Lyndon Johnson. "This is a failure exclusively of Democrats..." Lowry stated, just in case his point was lost on anyone. "It is an indictment of a failed model of government."
In the normal course of events, a presidential campaign should be the platform for a public debate on issues such as those raised by Lowry. This debate is nothing new, as the ink on the Great Society legislation was barely dry before Daniel Patrick Moynihan--a Democrat in Richard Nixon's administration--raised questions that mirror those suggested by Lowry forty-five years later. Whether the Democrat nominee is Hillary Clinton--or by some outside chance former Baltimore Mayor and Maryland Governor Martin O'Malley--Lowry has provided the broad strokes of the conservative critique of Democrat domestic policy. For her part, Hillary will be torn between the law and order centrism of her husband in her effort to retain white male voters, and the progressive stance of the Democratic left that Lowry suggests "has a soft spot for rioters." It is a trap, as Lowry understands well, from which she will have no easy escape.

Lowry's piece was not directly prescriptive of what should be done for what ails Baltimore, but his prescription was implicit: end federal programs and investments that have failed to work, and focus instead on tax, regulatory, education and other institutional reforms at the local level. If we are to engage the debate that Lowry suggests on the effectiveness of federal spending in alleviating problems of poverty and economic development, perhaps we could broaden our horizons beyond just the past fifty years. This April marked the 150th anniversary of the Robert E. Lee's surrender to Ulysses S. Grant at Appomattox Courthouse in April 1865. Since the end of the Civil War, the federal government has made huge investments in the south--through the location of military bases, investments in waterways, hospitals and rural electrification, and in myriad other ways.

What began as an effort to control the south during reconstruction continued as an effort to lift the south up from poverty and spur economic development. It continues today in large measure due to our constitutional bi-cameral framework that gives smaller states a disproportionate number of representatives and power in Congress relative to larger states. Year in and year out, smaller states get more back from the federal government than they pay in. For example, in 2013 alone the eleven former states of the confederacy received $287.7 billion more back from the federal government than they paid in.

Of course, that $287.7 billion of federal money had to come from somewhere, and that somewhere is the rest of us. My state, California, which is significantly disadvantaged due to its size, pays in almost $100 billion more each year than it receives back from the federal government. Our money flows through Washington, DC, to benefit residents of the former states of the confederacy and other small states, who benefit to the tune of an annual subsidy on the order of 20% of their personal income.

For 150 years, the federal government has poured money into the south, but to little avail. Perhaps the simple proof of Lowry's argument of the failure of social program spending is less in Baltimore than in the former confederate states. After a century and a half of throwing federal money at the problems of poverty and underdevelopment in the south, a brief review of socio-economic indicators--infant mortality, educational attainment, life expectancy--show that cohort of states firmly ensconced in the bottom quintile of states. In Lowry's words, it is an indictment of a failed model of government.

If we are going to discuss the effectiveness of federal policies in our cities--and we should--it is time to discuss as well why some states continue to benefit systemically to the disadvantage of others, with little or no benefit to show for it in terms of relative progress as measured by socio-economic indicators. Californians are often ridiculed for our high income tax rates relative to other states. If only we could manage our affairs like Tennessee--47th, 44th and 41st in infant mortality, life expectancy and educational attainment, respectively--a friend of mine often suggests, our tax rates would be lower and our economy would expand faster.

My friend has a point. Perhaps it is time for some accountability, as Lowry suggests, and to put an end to this failed experiment that has flooded federal money into a cohort of smaller states, to no demonstrable effect. A simple solution would be a constitutional amendment that provides that no state shall have to pay in to the federal government more than 110% of what it gets back.

Last year, California contributed $334.4 billion to the federal government and received $238.7 billion, for a net outflow of $95.7 billion. If California's contribution to other states that for so long have fed disproportionately at the federal trough were limited to 10%, as suggested above, the savings to Californians would roughly equal the $75.2 billion we now pay in our very high income taxes.

Today, Californians are being taxed $238.7 billion to fund our fair share of federal spending, and an additional $95.7 billion to pay for transportation, education, healthcare and water projects in states across the south and elsewhere. $95.7 billion is almost equal to the entire California General Fund budget and we sure could use that money back here at home. In one fell swoop, we would have the capacity to rebuild our own transportation, education and water systems. Or we could completely eliminate the state income tax and restore California's role as an economic engine for the nation and the world.

The proposed constitutional amendment--the Howard Jarvis Restoration of Freedom and Accountability Act--should appeal to Lowry and the conservative, federalist sensibilities of the Republican caucus. We can start from the principle that it is our money, and there should be limits on the extent to which we should be required to dole it out to Washington and the rest of the country. Call it a taxpayer revolt. In Rich Lowry's words, we are dealing with a failed model of government and it is time to change.

Monday, April 27, 2015

Sitting with Sean Hannity last week, Kentucky Senator Rand Paul expressed his outrage at money received by Bill and Hillary Clinton over the years and actions that they may have taken as public officials to benefit those who contributed funds. In various guises, the Clintons have been the beneficiaries of billions of dollars of funds given over the course of their decades in public life, whether paid as political campaign contributions when they were in or running for public office, for speeches during their years as private citizens, or as contributions to support the activities of the Clinton Foundation, including the Clinton Global Initiative.

As we have watched over the years, Paul and Hannity rained down accusations on the Clintons, suggesting nefarious interconnections between the activities of the Clinton Foundation and ultimately Hillary's actions as Secretary of State. There was no allegation of a specific illegal act--after all, unlike many of his colleagues in Congress, Paul is an ophthalmologist by training not a prosecutor--but instead suggestions of a broad conspiracy of money exchanged for political favors.

"How could this happen in America?" Paul railed on.

How indeed? As the foremost libertarian in Congress, a believer in free markets, and a principled opponent of government regulation, he should appreciate that in American politics, political influence is just one more marketplace. Republicans accusing the Clintons of illegal conduct from corruption to murder is nothing new. Bill Clinton was impeached after all. Voters returned him to office after waves of accusations and allegations, and today, after all that we have lived through--the screeds published by Regnery press, the grist that launched Fox to the top of the network rankings, to say nothing of Bill's sordid womanizing--Bill Clinton remains among the most admired figures in American life and Hillary is the presumptive presidential nominee of her party. Therefore, if one embraces libertarian theory and that markets incorporate all known information, then one must conclude that voters in political marketplace have long since rendered their judgment in favor of the Clintons.

The new wave of accusations against the Clinton's is nothing new. The commingling of money and politics has a long tradition in our democracy. I am sure that Paul would contend the growth of government spending over the course of the republic from 3% of GDP to 30% was driven by the simple fact that government spending benefits people and companies and that those beneficiaries fund political campaigns to protect their interests. Government regulation has grown because it protects private interests as well as protecting the common good, and those whose interests are protected regularly fund political campaigns to gain or secure such regulatory protection.

Even if these exchanges of political money for political favors are not illegal under our laws, Americans understand that money paid to gain political influence is a corrupting fact in our democracy. The Center for Responsive Politics tracks the flow of political contributions to members of Congress and for each two year election cycle. For example, according to CRP data Rand Paul raised $5.7 million in the run-up to his recent reelection to the Senate during the 2014 campaign cycle. Of that money, $834,000, or just under 15% came from the finance sector. I am just using Paul as an example, of course. Based upon CRP data, the financial services sector is the largest funder of political campaigns and lobbying at the Congressional level. Over the past ten years, that sector has spent over $3.8 billion on campaign contributions and lobbying, an amount that totals almost $1 million per member of Congress per year. The financial services industries have strategic interests in Washington, DC, where their lobbyists work to promote and protect their interests, and call on those members whose campaigns they have funded to secure their support when needed.

Charles Koch, a libertarian like Senator Paul, has been outspoken in protesting the selling of corporate interests in the nation's capital. In his Wall Street Journal editorial in March 2011, he attacked crony capitalism and corporate purchasing of special favors in Washington that he suggests erode our overall standard of living. Today, businesses--including Koch Industries Charles Koch concedes--spend money in Washington because it works. There are few investments a company can make that offer a higher potential return on investment than government contracts or regulatory protection procured through campaign contributions and lobbying in Washington, DC.

The average American shares the perspective that their government is for sale. It strains credibility to assert that political money of the magnitude reported by the Center for Responsive Politics is not provided for the purpose of influencing public policy and gaining a financial return. Charles Keating, the CEO of Lincoln Savings and Loan said it best a quarter century ago in the wake of an earlier financial crisis. Keating famously contributed $1.3 million--a pittance by today's standards--to the campaigns of five senators, seeking their help working with bank regulators. When asked during a congressional hearing in the wake of what became known as the Keating Five scandal if he intended to get something in return for his money, Charles Keating responded simply "I certainly hope so." And so it is today.

From the founding of the republic, the intermingling of money and political power have been central to the nation's politics. Today, Americans on the right and on the left, members of the Tea Party and the Occupy Movement, are animated by their deep distrust of the workings of the nation's capital. Americans know instinctively that the financial collapse, the stagnation of the middle class, the increasing share of the economy dominated by the non-productive financial sector, and influence of political money are interrelated.

Of course, Charles and David Koch are major actors in the world of political money. They have famously committed to raise $900 million for the 2016 campaign cycle. They recently hosted a well-publicized retreat of potential Republican presidential candidates to vet their commitment to the Koch agenda. Charles Koch's principled opposition to the corruption of Washington, DC, was not enough to keep him and his brother from being willing buyers in the political marketplace at the highest levels, and the slate of potential Republican presidential nominees that attended the Koch fandango in hope of winning a share of the Koch money--which included Senator Paul--showed that there were willing sellers as well.

As a general matter there is no stated quid pro quo in these matters, no smoking guns that link the payment of money to a specific vote by a member of Congress. Congress is comprised largely of lawyers who understand that under law a quid pro quo is the essence of a corrupt relationship. But the perception of corruption, as it is seen by the average American is not about the explicit quid pro quo, it is about the nature of the enterprise seen in its totality.

Rand Paul is not a lawyer, so perhaps his outrage stems from his perception of the totality of the Clinton enterprise, not whether any particular law was broken. "It reminds me of people using the system to enrich themselves, I think it looks unseemly," Paul concluded. And indeed it does.

But "How could this happen in America?" Clearly Rand Paul has not been paying attention. He should know well how this happens in America. He is a U.S. Senator, after all.

Thursday, April 23, 2015

Hillary Clinton is in, and with her announcement the rest of the Democrats considering running for president in 2016 are out. In a manner reminiscent of the Republican Party of old, Democrats have ceded the nomination to Hillary Clinton. It is not exactly clear why this is the case. She clearly has a large following in the party and has a huge fundraising base, but that was true eight years ago as well. Perhaps it is because she lost a close race for the nomination last time that she is being handed the baton this time. Or perhaps the theory is that as the scorned candidate and cuckolded spouse she has suffered enough, that it is her turn. Whatever the reason, Hillary is off to a rocky start, and it could be a long year.

It used to be that the Republican nomination outcome was pre-ordained. Sure, the GOP went through a primary process, and every so often--1964 comes to mind--the clash between the conservative and establishment wings of the party could be titanic. But the era of the GOP as a tightly controlled cabal where candidates waited their turn and tenure and experience were rewarded is over. This year, the imprint of Barack Obama is evident as well. Tenure and experience are passé. Ted Cruz, Rand Paul and Marco Rubio are first-term Senators, and each mock rather than defer to the establishment candidate, Jeb Bush. John McCain, Bob Dole and George H. W. Bush must look on and shake their heads.

Hillary Clinton, by contrast, will be the candidate of experience. She only announced her candidacy two weeks ago, but already Clinton fatigue has begun to settle in. Hillary has been in the public eye for a quarter of a century, yet she began her campaign with a strategy to remake her image. Her campaign--we knew this already--will be a meta-campaign. It will not be about what she believes in or promises to do, instead everything she says and everything she does will be scrutinized from the perspective of strategy. What she says will not be the focus, but rather why she is saying it. Little or nothing will be taken at face value.

This is because strategy rather than commitment and values are central to the Clinton brand. Bill Clinton emerged from the back woods of Arkansas and won the White House as a "New Democrat". A New Democrat was a phenomenon not of principle but of strategic positioning. In accordance with game theory, in a two party race a candidate should seek to position him or herself as close to the opposing candidate as possible in an effort to capture the "median voter" in the center, and then take by default everyone else on their side of the ideological spectrum. Bill Clinton embraced this strategy and moved as close as he could to the moderate Republican position with the expectation that he could then take all of the votes to the left of that position. Thus it was that voters on the left who voted for Bill Clinton for President in 1992 described the experience as being at a shotgun wedding. Bill Clinton said it best early on in his first term when he pronounced to his cabinet "We're all Eisenhower Republicans now."

Hillary's coronation has not been eagerly embraced by the Democratic left. She has been unable to convince those who have urged Elizabeth Warren to run that she shares the Massachusetts Senator's outrage at the pandering to Wall Street, or those who admire Vermont Senator Bernie Sanders that she is animated by passion for traditional Democrat values, including support for labor and distrust of free trade, charter schools and other hallmarks of now-entrenched New Democrats. In Hillary's remarks declaring her candidacy, she took the obligatory swipes at Wall Street and growing income inequality. But her claims that she would work to repeal of the carried interest exemption that blesses hedge fund and other investment managers with a lower tax rate than Warren Buffet's secretary or perhaps champion campaign finance reform rang hollow, and were quickly dismissed even by Wall Street supporters as a necessary strategy would never be manifest in policy down the road. Hillary's claims that she would take on Wall Street and campaign finance--issues that animate both the right and the left against the entrenched center--only served as a reminder that the Clintons have been the recipients--through campaign contributions, speaking fees and donations to the Clinton Foundation--of literally billions of dollars in largesse from the richest people, corporations and countries in the world.

The issue of money is likely to haunt the Clinton campaign in the months to come. Any hope that Democrats might have had of making hay of the corrosive effects of money on our democracy--whether targeting Citizen's United, SuperPACs, or the $900,000,000 David and Charles Koch have committed to raise for this campaign cycle--will be neutralized by the many manifestations of the ways that the Clintons have enriched themselves and their world.

This week, the New York Times published a story suggesting linkages between the activities of the Clinton Foundation, Hillary's actions as Secretary of State, and Bill Clinton's receipt of a $500,000 speaking fee from a Russian Bank, surrounding the sale of uranium assets by a Canadian company to a Russian company. The story is a product of an agreement reached by the Times, together with the Washington Post and Fox News, with Peter Schweizer, author of the forthcoming book "Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich" to research the information he has compiled regarding connections between political contributions and speaking fees paid to the Clintons, contributions to the Clinton Foundation, and Hillary Clinton's actions as a public official.

A decade ago, Philadelphians saw up close the mixing of philanthropy and politics erupt into a corruption scandal. Vince Fumo was a powerful Democratic State Senator in Pennsylvania who created a charitable organization called Citizens Alliance for Better Neighborhoods. In 2004, Philadelphia Electric Company made a $17 million contribution to Fumo's charity. Federal prosecutors began an investigation into whether the PECO contribution had been given in exchange for Fumo agreeing to support utility deregulation in Pennsylvania. Ultimately, the corruption case could not be proven, but Fumo and two members of his Senate staff were indicted on charges of obstruction of justice for destroying electronic evidence, including e-mail related to the federal investigation.

The parallels with the Clinton foundation are ominous: A charitable organization created by powerful political figures, staffed by political associates, taking philanthropic contributions from people and organizations who can benefit from the actions of the sponsors of the charitable organization, and, of course, the destruction of electronic communications that in the worst light could be seen as bearing on those interrelationships.

While the Times was quick to deny that they had documented any quid pro quo or illegal actions in their scrutiny of the uranium deal, the Clinton campaign asserted in the article that no one "has ever produced a shred of evidence supporting the theory that Hillary Clinton ever took action as secretary of state to support the interests of donors to the Clinton Foundation." That may well be true, but it is not necessarily is the point either. For Americans who are distressed by seeing Republican presidential candidates catering their stances on Israel and Iran to curry favor with casino magnate and mega-donor Sheldon Adelson, or who cannot imagine that the $5 billion of Wall Street money given to Congressional campaigns over the past decade is not linked to the increasing concentration of wealth and power in the finance industry, the magnitude of the Clinton empire is troubling in and of itself.

It is just two weeks into the 2016 Presidential campaign and Democrats have ceded their nomination to Hillary Clinton. They better hope that she and Bill have good answers to the questions that are going to be coming their way. We could be in for a long year.

Monday, April 20, 2015

It's a trick question: Who should be driving GOP foreign policy, James Baker or Sheldon Adelson?

Perhaps nothing epitomizes the state of affairs in the Republican Party today more than the estrangement of James Baker from the Republican establishment. Nothing, because for what seems like decades James Baker was the Republican establishment. White House Chief of Staff to Presidents Reagan and Bush 41, Secretary of the Treasury to the former and Secretary of State to the latter, Baker was the quintessential political insider, negotiator and diplomat, mover and shaker.

Baker's fall from grace began on a gentle slope in 2002 when he and Bush 41 National Security Advisor Brent Scowcroft demurred on the wisdom of launching the second Iraq War. Baker and Scowcroft had opposed toppling Saddam at the end of the first Gulf War for fear that a civil war would ensue, and they saw the same risks in the plans of the ascendant neoconservatives who had grabbed the reigns of American foreign policy under Bush 43. As the promised dream of a brief war leading to a grateful new democratic nation deteriorated into the beginnings of a national nightmare, Baker had one last moment in the sun. In 2006, as the co-chair of the Iraq Study Group, Baker stood as a reminder of what internationalism in foreign policy was supposed to look like.

That moment, of course, was short lived. Baker endorsed bringing Syria and Iran into negotiations on regional issues to settle the hemorrhaging Iraq conflict. But realism in foreign policy had been replaced by the "revolutionary utopianism" of the neoconservative movement, as Scowcroft described it in 2005: “How do the neocons bring democracy to Iraq? You invade, you threaten and pressure, you evangelize... This was said to be part of the war on terror, but Iraq feeds terrorism.” Democracy, freedom and liberty were on the march, and the tip of the American spear would not be negotiation among adversaries, it would be regime change. Baker's worldview was outdated. It smacked of compromise, at best, of appeasement, at worst.

After a decade when he receded from public view, Baker's slide went into free fall last month when he addressed the liberal, pro-peace Jewish organization J Street. In one fell swoop, Baker ran afoul of the mainstream Jewish establishment--with whom he has had tendentious relations over the years--when he lent credibility to the anti-establishmentarian, anti-AIPAC, J Street organization, and of the leadership of the Republican Party when he criticized Israeli Prime Minister Bibi Netanyahu, who has become a god among men in Republican circles, and enjoys the personal protection of casino magnate and Republican Jewish mega-donor Sheldon Adelson.

It is all about Iran, of course, and about the searing hatred in Republican circles of President Obama. Netanyahu, Adelson, and at least forty-nine Republican Senators are on record opposing any deal that might emanate from the current negotiations. In the wake of Baker's J Street criticism of Netanyahu's judgment on Iran and commitment to peace in the region--comments that placed him closer to the views of the President than Congressional Republicans--Presidential aspirant Jeb Bush moved to distance himself from his father's consigliere--and the man who orchestrated his brother's victory in the Florida recount of 2000--further deepening Baker's estrangement from the party that he once owned.

This week, the National Journal reported on a GOP poll that suggests that the 2016 election could revolve as much around national security and foreign policy as the economy. In the wake of two long wars, metastasizing conflicts within the Muslim world, growing hostility between Russia and the west, and the national embarrassment of the President and forty-seven Republican Senators competing for the attention of the Ayatollahs in Tehran, a full throated debate over foreign policy is certainly long overdue. But the enthusiasm of GOP operatives for the poll and the conviction that American anxiety over national security necessarily bodes well for one party in particular may be misplaced. It may be that the estrangement of James Baker from the center of gravity of the Republican Party mirrors the widespread disillusionment of Americans with our nation's war policies, where less than 40% of Republicans and Democrats alike believe that we have achieved our objectives in the Iraq and Afghan wars.

American foreign policy has shifted profoundly since the Reagan-Bush years when Baker was at the apex of his career. The neoconservative embrace of regime change during the Bush 41 years has become central to our relationship with others in the world with whom we have disagreements. We eschew negotiations with our enemies or outcomes that reflect a balance of interests--that is to say all of those things that remain central to James Baker's worldview--in favor of overt demands for regime change. It has become central to our relationship with Vladimir Putin and with Syria's Bashir al Assad, as it is with Iran. In each case, we work assiduously to seek the downfall of a regime in power, and in each case, we presume to know that what would come next would be better should we succeed.

Yet the events of the past decade suggest that things are not that simple. There is scant evidence that what would come next in any country whose system we are determined to overthrow would necessarily be better. In Russia, as much as we disdain the naked aggression and hubris of Vladimir Putin, the chance that his downfall in the wake of steadily increasing western pressures would lead to a liberal, democratic alternative seems far less likely than the ascendency of a more chauvinistic, right wing successor, allied with the intelligence services, the military and the Russian Orthodox Church. In Syria, the rise of Sunni radicalism in the forms of ISIS and Jabhat al-Nusra have given credence to warnings from Russia and others--to say nothing of Syrian Christian and other minority communities that support Assad--that continuing American pressure for Assad to resign could lead to a situation that would be worse, not better.

The regional sectarian war that James Baker and Brent Scowcroft feared as an outgrowth of the first Iraq war in 1991 is now coming to be, drawing in Saudi Arabia and Iran as they foresaw. In the upcoming presidential campaign, the candidates are likely to tell us how tough they are and how they will take the fight to our adversaries. But after years of war and vitriol, Americans may wonder how it is that Richard Nixon could bring the cold war to an end and normalize relations with the Soviet Union and China, and how Israeli Prime Minister Menachem Begin could ink a peace treaty with Egypt, and ask why those who aspire to lead our nation seem to have lost the capacity to imagine any path to peace with our adversaries today other than through war.